Will Work For Free? The Future Of The Unpaid Internship

This is TALK OF THE NATION. I'm Neal Conan in Washington. With school out, many college - and even some high school students - will spend the summer working as interns. It's a chance to beef up their resumes, gain on-the-job experience and make valuable contacts. Last week, a federal district court judge in New York issued a ruling that could change the system.

Judge William Pauley ruled in favor of two unpaid interns who worked on the movie "Black Swan," and they argued that Fox Searchlight Pictures violated minimum wage and overtime laws. With similar suits filed recently against Conde Nast and Warner Music Group, private employers are rethinking their unpaid internship programs and may decide to scrap them altogether.

If you're an employer, have you changed your intern policy? And if you're one of those who have applied for an internship this summer, what do you hope to get out of it? 800-989-8255. Email us, talk@npr.org. And you can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION.

Later in the program, Lemony Snicket explores a basic childhood fear in his new book "The Dark." But first we begin with New York Times labor and workforce correspondent, Steven Greenhouse, who joins us from a studio at the newspaper. Steven, always good to have you on the program.

STEVEN GREENHOUSE: Nice to be here, Neal.

CONAN: And this judge's ruling seems to uphold a familiar complaint from intern advocates, that many companies hire them to do menial labor - answer phones, take out the garbage, fetch coffee - otherwise, they'd have to actually pay somebody to do.

GREENHOUSE: Yes, this was in many ways a classic case of interns - of unpaid interns. You know, interns often, you know, get lunch, they go out for - get coffee, they sort things, they type cover letters. And the two interns who brought suit were both college graduates. One actually had an MBA. And they wanted to get into the film industry, and I think they were really disappointed, Neal, that they were doing this really be - you know, menial, basic work.

And I think the reason that this judge's decision from last week is having such shock waves is I think many companies hire and use interns, unpaid interns, in the same way, and they say oh, if a judge is socking a prestigious company like Fox Searchlight and saying you are illegally not paying these interns, I think a lot of corporate officials are worrying hey, we might face lawsuits, we might face judicial rulings that hold us accountable, as well.

CONAN: And we have to put in some caveats here. This is one judge in one district, and this is just for for-profit companies.

GREENHOUSE: No absolutely, Neal. You know, there is some tension among judges, among courts. The Sixth Circuit in the Midwest, kind of, came out another way in a case involving interns. You know, I think again why this case has gotten so much attention was it's in New York, and it's kind of the classic internship format, where, you know, smart college kids, college graduates, are working for a company doing menial work, and here the judge said I'm going to use the six-part test articulated by the U.S. Department of Labor that says if the interns are doing work done by regular employees, displacing regular employees; if the internship is to the immediate advantage of the employer; if it's not really a vocational type of setting, you know, if they're just doing regular work; then this judge found under the Department of Labor's six-part test, then the intern has to be paid.

The Sixth Circuit, which is in ways a higher, you know, U.S. appeals court, said, you know, we don't like this six-part test articulated by the U.S. Department of Labor. We think it's too rigid. You know, we prefer another format. Whoever the primary beneficiary is, meaning if the company is the primary beneficiary of the intern's work, then the intern should be paid; if the intern is the primary beneficiary of the internship, then the intern shouldn't be paid.

That's a very fuzzy test as you realize, Neal. You know, how do you know, you know, is it 51 percent benefiting one and 49 percent benefiting the other? And I think an advantage of the Department of Labor test is it has much clearer, brighter lines about when you should be paid and when you should not.

CONAN: Well, it suggests that an internship, you should be learning about the business, not making copies.

GREENHOUSE: Yes, the kind of seminal document decision about interns is actually from a 1947 U.S. Supreme Court case. That's really the last time the Supreme Court really got involved in trainees. And it was some people working for the railroad, learning how to do railroad work. And it was very much a typical vocational trainee situation where in many ways, you know, the railroad wasn't benefiting at all.

It was kind of spending its resources to teach these folks, you know, how to do various railroad work. And the Supreme Court said, you know, these are real trainees. These aren't people doing work that is to the advantage of the railroad. And so they're trainees, and they don't have to be paid.

And the Department of Labor kind of has taken that ruling and set up these six criteria and said these are the six criteria, which in their view the Supreme Court would require that employers meet if they're not going to pay their interns. And those criteria are pretty hard to meet. They set a pretty high bar.

CONAN: And if you look at the ruling, though, it says they violated the minimum wage and overtime rules. Does that suggest that this also might apply to paid internships if they're not making minimum wage, and they're not getting overtime?

GREENHOUSE: So there's an - another reason why last week's decision is getting so much attention is right in its wake two other prominent companies were sued under the same theory. You know, Conde Nast, the very prestigious publishing house, you know, which publishes the New Yorker; and Warner Music, another prestigious music house, they were sued. And at Conde Nast, you know, Conde Nast in ways tried to get on the right side of things after the initial wave of interest in unpaid internships a few years ago.

It announced it was going to start paying its interns $550 a semester. So it could say our interns are not, you know, unpaid. We pay them. But nonetheless, these two interns sued Conde Nast - one who worked for the New Yorker, one who worked for W magazine - saying, you know, I worked 100, 200, 300 hours during the semester, and even while receiving $550 during the semester, that did not meet the $7.25 an hour requirement of the minimum wage.

So they're saying that's not enough.

CONAN: So even paid internships, they're arguing they were underpaid. We want to hear from those of you who are seeking internships. What do you hope to get out of it? And we want to hear from employers. After this ruling, are you changing your policies or looking at them again? 800-989-8255. Email us, talk@npr.org. We'll start with David(ph), and David's on the line with us from Waller in Texas.

DAVID: Hi there.

CONAN: Hi there, go ahead, please.

DAVID: I finished an internship with the Houston Chronicle last year. So mine's kind of past tense, if it's all right.

CONAN: And so you've already passed the internship. What did you hope to get out of it? What did you get out of it?

DAVID: Well, on the bright side, I did get quite a few news clips to go into my portfolio, and I met quite a few people, especially considering, you know, I was in downtown Houston. But on the negative side, you know, I was an unpaid intern, which quite a few of us were a little unhappy about, and we got college credit through the University of Houston, but we did have to pay for our course, which was an internship agreement between U of H and the Houston Chronicle.

So I embarrassingly enough paid for my internship, which doesn't seem to be uncommon these days.

CONAN: And have you - did it result in then getting a job?

DAVID: Well, I'm technically freelance these days. I'm not - you know, I'm in the newspaper industry, so it's not the best time to be a young person looking for a newspaper. But it didn't hurt, I suppose you could say.

CONAN: Well, freelance is a word you may have to get used to. Good luck, David, thanks very much for the phone call.

DAVID: Thank you.

CONAN: Interesting story. Let's go now to Camille Olson. After the ruling in the Fox Searchlight Pictures case was announced, she got a few calls from companies wondering what does this mean for us. She's a partner at Seyfarth Shaw and represents a lot of employers. She joins us from a studio in Irvine, California. Camille Olson, thanks very much for being with us today.

CAMILLE OLSON: Thank you.

CONAN: And what did the - what did your clients ask?

OLSON: Well, the question really is: Does this mean the end of unpaid internships? And if an intern or a worker appears to understand what the situation is and has agreed to provide the services without being paid, does that make a difference? Those are a lot of the questions that I'm getting, and I think it's really important for employers to understand that an employee or a worker who provides services to them cannot waive their rights under, either federal or state, minimum wage and overtime laws.

And so what we've been looking at is the issue of is the program that you are having the worker provide services under one that's a bona fide training or internship program? In effect, what the law says, and Steve has described it very well, is that if the primary benefit of the program is to really provide training opportunities, as opposed to compensation to the worker, that it may satisfy the federal and state laws regarding not having to pay someone minimum wage.

But it's very few and far between, in terms of internships that are unpaid, that actually satisfy those rules for for-profit companies. So many of them are saying what should we do in terms of analyzing our programs, and some of them are looking to decide, given the types of work that we're giving these workers, maybe it is work that's very similar to work that we give to our regular employees - or they're displacing our regular employees - we may need to determine to, at least, pay these workers in compliance with the minimum wage and overtime laws because there's too much risk attached to whether or not there's sufficient benefit being given to the workers.

CONAN: And our previous caller, his job sounded a lot like cub reporter, which people used to get paid for - not much - but used to get paid for. If they're going to have to pay minimum wage or maybe a little more for this same kind of work, they're clearly going to have fewer people, young people, around.

GREENHOUSE: That's correct, and there will be fewer internship opportunities available to students. That's the really - the rub in terms of the issue. But it absolutely is important for employers to understand that internship programs that comply with the federal law in terms of being unpaid have to be programs that provide robust training opportunities, training meetings, a situation where the employer is really providing a significant amount of mentoring so that even if the cub reporter is providing an article that may even be able to be used, for example, in the newspaper, it has to be the case that the benefit of using that article is almost outweighed by the amount of time and editing and coaching that is provided to that worker in the context of them learning the skills to be able to write that article.

CONAN: And of course that mentoring and that editing, that takes time and money, too. If you're an employer, are you changing your intern policy? And if you've applied for an internship this summer, what do you hope to get out of it? Give us a call, 800-989-8255. Or send us an email, talk@npr.org. More with Steven Greenhouse and Camille Olson after a short break. Stay with us. It's the TALK OF THE NATION from NPR News.

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CONAN: This is TALK OF THE NATION from NPR News. I'm Neal Conan. Today we're talking about unpaid internships. A federal judge ruled recently that Fox Searchlight violated minimum wage laws for not paying two interns, which calls into question this country's long tradition of hiring students to work for for-profit companies without pay.

According to the Department of Labor, nonprofits like NPR can generally make use of unpaid interns who, quote, volunteer their time. But here, interns earn a stipend of about $350 a week and have for the last two years. It's an initiative describe by the head of talent acquisition as a way to broaden the candidate pool to a wider audience, not just those with the means to take an unpaid internship.

So if you're an employer, have you changed your intern policy? If you've applied for an internship this summer, call, tell us, what do you hope to gain from it? 800-989-8255. Email us, talk@npr.org. You can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION.

Our guests: Steven Greenhouse, labor and workplace correspondent for The New York Times; and Camille Olson, attorney at Seyfarth Shaw. And Steve Greenhouse, as we look ahead, roughly half of internships are paid, and half are unpaid?

GREENHOUSE: Yes, my sense - I'm told from some studies that there are more than a million internships a year, and according to a survey by the National Association of College and Employers, about 47 percent of them are unpaid. And, you know, there's a new article I read in The Atlantic saying that people who - members of the class of 2013 of this year's college crop who had paid internships had a much better likelihood of getting jobs, you know, 63 percent of getting a job offer, compared to just 37 percent for students who had unpaid internships.

And I think a lot of employers are, you know, as Camille was saying, are going to have to rethink whether they want to kind of stick their necks out and continue using unpaid internships and perhaps risk being sued, being hit by a court, or whether they will, you know, pay the $7.25 an hour to make sure that they're good with the law.

My sense is, you know, according to the Supreme Court decision back in 1947 about training internships, it kind of said the whole internship program almost has to be - almost use the word charitable, you know, kind of an industry effort to, you know, to train people so they're better prepared to work in the industry some day, not specifically to help your company but to help, you know, railroad employers or newspaper employers or publishing employees. And that's why there's that weird line saying that the internship should not be for the immediate advantage of the company.

Now a lot of companies say that's kind of absurd; of course, you know, we're not going to do an internship, at least we get at least some advantage or else why bother. So, you know, there's this tension between what the Department of Labor's rules say, what the 1947 Supreme Court said, and what employees say makes common sense.

They're saying there are gazillions of kids who want these unpaid internships, and yes, we the company, you know, gain some advantage from it, and if you require that we pay all these interns, we're going to have far fewer of them, and that's going to hurt all these kids who are dying for - you know, to get their foot in the door and to get some basic training.

CONAN: Camille Olson, why bother? Well, you can see the advantages from the intern's point of view, they get a foot in the door. At the same time, companies, well, they get to some degree this free labor, but on the other hand they get a chance to look at a whole crop of young people who they're not obliged to actually hire.

OLSON: Absolutely. It's a perfect trial period. You have a section of usually two to three months where you really can get to know someone, you're working with them closely. You see them in your workplace. And it - there is no promise that you're going to get a job just because you've had an internship with the company. So it provides a wonderful look for a company at a prospective employee.

And as Steve has mentioned, it's been very helpful in terms of providing later employment opportunities to those individuals either at that company or at others.

CONAN: Let's get Chelsea(ph) on the line, Chelsea's calling us from Fredonia in New York.

CHELSEA: Hi.

CONAN: Hi, you're on the air, go ahead, please.

CHELSEA: I'm currently an unpaid intern with a local non-for-profit organization. And I first of all want to say that I'm absolutely getting the experience and supervision that I desire, and it's really helping me out. But it's unpaid, and I have to pay tuition to attend this internship, and it's $1,000. So it's completely fulltime, and I'm working 20 hours on the weekends just to make ends meet.

CONAN: So at a paid job, retail or something like that?

CHELSEA: Right, right.

CONAN: And what - your internship, what field is it in?

CHELSEA: It's in music therapy.

CONAN: Music therapy. And Steven Greenhouse, that points up a lot of these internships, as Chelsea's are, are integrally tied to college programs. They're part of the curriculum.

GREENHOUSE: Yes, you know, as David, the first caller, said, Neal, you know, there's this I think - you know, to David, to David's point of view, it's kind of absurd that he probably had to pay $500, $1,000, $2,000 for course credit to do the internship. So when he worked at the Houston Chronicle he got course credits, and he's saying this is crazy. I was doing this work. Not only was I not getting paid by the Chronicle, although I suspect he learned a lot from the editing and from the editors there, but he said not only was I not getting paid, but I had to shell out a few thousand dollars.

So that's great for the school, you know, who doesn't really, you know, have to provide professors to me for that course. It's great for the newspaper because they're not paying me. And it isn't so great for me, David. Yes, I learned some stuff from the newspaper, but, you know, I ended up, you know, ended up losing a few thousand dollars.

You know, something else that's going on, Neal, is that some schools, realizing that some of these unpaid internships are very valuable, they're giving their students, you know, summer stipends of $2,000, $3,000 to enable them to work in summer internships, which are going to be unpaid.

One frequent criticism of unpaid internships is that only people with rich mommies and daddies can afford to do that. You know, people whose parents, you know, work on Wall Street can afford, you know, to do unpaid work, unpaid internships at the great publishing houses, at the great magazines, and they really get their foot in the door for these very sexy jobs, whereas, you know, poor kids who have to work in McDonald's or Wal-Mart over the summer, you know, might not get the same great opportunities.

So I think these schools feel it's very noble, these colleges feel it's noble to give these stipends of $2,000, $3,000 for their students to take these unpaid internships.

CONAN: Let's see if we can get another caller in. This is - oh, Chelsea, by the way, I have to say thank you.

CHELSEA: Thank you.

CONAN: And let's see if we can go next to Alex(ph) and Alex on the line with us from Kansas City.

ALEX: Hey there, thanks for taking my call. Neal, I'm a former intern and now an employer in the culinary industry, and it's super-built into the structure of culinary school that you have to do an unpaid internship. So I'm curious as to how this is going to have an effect because, you know, we can't afford to hire newbies to do a job, even at minimum wage.

CONAN: And there are not too many nonprofit kitchens.

ALEX: Not any that I know of.

CONAN: So how is this going to work? What are you going to do?

ALEX: You know, we'll probably just keep hiring them and hope nobody, you know, really gets upset or, you know, we may just have to stop using interns, which, you know, is (unintelligible), and it can be hard on a business when you're used to it.

CONAN: What do you use them for?

ALEX: We're just training, and they're people that want to be in, you know, learning what we do. And, you know, they want to learn, and they don't care if they get paid. So they're just doing small kind of jobs just for the opportunity to pick up, you know, a good recommendation from, you know, an employer, as well as to learn different sorts of, you know, techniques and things that they don't learn at school.

CONAN: To learn how it's done in the real world, not just at school.

ALEX: Exactly, exactly.

CONAN: All right, Alex, thanks very much, good luck with that.

ALEX: Hey, thank you.

CONAN: Camille Olson, I wanted to bring you in here. This is - again, a lot of the time, people say they're willing to - I'd do anything to learn the tricks of the trade in the kitchen, and if it's unpaid, that's the system. If everybody is unpaid, that's the way it works. Six months later, they may not feel the same way.

OLSON: You're absolutely right, and again, you know, I have to go back to sort of a fundamental philosophy of both federal and state law, which is an employee or a person can't waive their rights. So the fact that somebody would walk in and say I understand it's unpaid, and I'll take whatever you give me in terms of the work because I want this on my resume, and I want to make some contacts in this industry is not a sufficient basis for an employer to say they knew it, they even signed an agreement saying they understood it was going to be that way.

It is incumbent on the companies and the employers to ensure that they're setting up bona fide training and vocational-based internship programs that really are being set up for the benefit of the worker, as opposed to the company.

CONAN: Here's an email from Dustin(ph) in Deadwood, South Dakota: I'm a 33-year-old business owner, so not far removed from my own intern days. Although unpaid interns are pretty common in the ad industry, we've always compensated our interns with either a stipend or an hourly wage. However, we haven't offered many internships lately. It takes a good deal of our resources to train them, and many of them leave the area after graduation for larger urban areas that doesn't leave much incentive for our firm.

And, again, Camille Olson, if you're going to have an unpaid internship program, you have to spend money to train those people.

OLSON: You do have to spend money to train those people in addition to your own managers and supervisors who are working with them because you want to make sure that, you know, on a case-by-case basis, someone who you've assigned as a mentor to that intern is somebody who understands what their role is and their responsibilities are.

It's not just extra help for the summer. It's someone who you are saying you're not paying them, but you're going to be investing in them in connection with their learning opportunities. And it's not someone that you should be looking at as someone who's an extra hand to do the work. If that's the focus, you've got to make sure that you're paying them at least minimum wage.

CONAN: Let's get Josh(ph) on the line, Josh with us from Columbus.

JOSH: Hi. How are you doing?

CONAN: Good. Thanks.

JOSH: I am a retail store owner. We've been open about seven years, and we have had unpaid interns off and on in the past. We do currently. We probably get 20 to 25 kids in the semester that request an internship. We typically select one or two. We have certainly hired several of them beyond internships in the past.

I guess, for me, I think it's unfortunate for the students because we hear all the time that they prefer to work for a smaller firm like ours because they're working oftentimes directly with the owners, and we certainly try and be as educational as possible. I walk them through the steps of everything I'm doing, whether it's a menial task like writing a purchase order or, you know, ringing somebody out and make sure that they know exactly what we're doing.

I think that they're more likely, especially the kids that are going into the field that we're in like retail, if they want to do brick-and-mortar, they're going to get more out of working with a company like ours than they are out of a larger company because we're...

CONAN: But are you now - are you rethinking it now?

JOSH: Oh, absolutely. Yeah. I mean, you know, it's unfortunate because with us, we sort of have the sink or swim mentality. And so I'm more likely to bring a kid in, see what they're good at and help them hone those skills as they relate to my business, but definitely help them think about what they're good at and get better at it.

We don't have the resources to develop a program, and so it's harder for me to answer those more ethereal questions if any sort of legal action were to occur. If somebody came in and said, well, you have been selecting brands, and that's the job of a buyer, so you are, in effect, you know, moving this job that would be paid to somebody else when what I'm saying is I think this kid's got a really good eye, and I want to help him develop that eye.

CONAN: Mm-hmm. Well, it - it's a complicated issue. You're right. And it's - it could be a fairly subjective decision as to whether you continue the program or not.

JOSH: Absolutely.

CONAN: Josh, thanks very much for the call.

JOSH: Thanks for the show.

CONAN: Appreciate it. And, Camille Olson, I wanted to thank you for your time today.

OLSON: Thanks very much, Neal.

CONAN: Camille Olson joined us from a studio in Irvine, California. She's a partner at Seyfarth Shaw and represents many employers. Steve Greenhouse, stay with us there in New York. I want to ask you something. You're listening to TALK OF THE NATION from NPR News.

Steve, we've had you on the program many times over the years, talking about employment. Of course the Great Recession has been your beat. You told us - I think on your first appearance on the program - that you were frightened for your nation because of the number of people who were being left behind in the recession.

We're seeing a bit of a recovery today. Ben Bernanke, the chairman of Fed, said maybe down to six-and-a-half percent unemployment by this time next year. That's an improvement. There's still an awful lot of people who are going to be out of - still never catch up.

GREENHOUSE: Yes. I remember - I think I was on your show - probably around December 2008 in the real depths and dark days of recession, Neal, I was feeling very glum that day, not because I was sitting across from you face to face, but things were really, you know - remember, back then, we were losing a million jobs a month, and it was very, very scary.

And it wasn't clear whether we would be able to turn things around at all or how soon it would take. And, you know, things are getting better, you know, thank God, but there are still, you know, 12 million Americans out of work. Millions and millions of Americans have been, you know, have been long-term unemployed, without jobs for six months. Many, many, many Americans are seeing their wages stagnate.

So while things are getting better for, you know, millions, tens of millions of Americans, you know, still a lot of families are struggling. And, you know, we've had the situation where the stock market has, you know, hit record levels. It's come back a bit. Corporate profits have broken records. Yet, you know, many, many workers - you know, whether it's in janitors or fast food workers or retail workers, workers for Caterpillar - are seeing their wages stagnate.

And they see other people getting ahead, and they feel they're not able to get ahead the way they thought they were. They feel they're not getting ahead the way their parents were in the 1960s and '70s and '80s. And, you know, I know in December 2008 many of us thought that things are very dark. And, you know, with unemployment climbing above 10 percent, they were dark days for the country, and I was really worried.

Thankfully, things are getting better. I think many of us, including Ben Bernanke, think that things still aren't where we would like. You know, he's aiming for unemployment at least below 6.5 percent. We'd, of course, like it below five percent. And I think if the - you know, if unemployment falls below five percent where it had been before the recession hit, I think we as a nation would feel much better. Wages would be going up more. People would be happier.

CONAN: And the gap, the huge gap between the top five percent of the country and everybody else, that has also been deeply worrying.

GREENHOUSE: Yes. I'm actually working on a story about this right now, Neal. I was looking at the statistics from Robert Gordon, this professor at Northwestern University. He wrote that between 1993 and 2008, a 15-year period, 52 percent of the nation's income gains went to just the top one percent of Americans. And, you know, the top one percent now have 21, 22, 23 percent of all income, you know, which is more than double what it was in the 1980s. And you know, at the same time, people in the bottom, you know, 30, 40, 50 percent, their incomes have really stagnated. You know, household income is down from where it was 12 years ago. I think this is probably first time since the 1930s when household income has actually declined over more than a decade, and that's causing many Americans and their children to start questioning, what is the American dream? You know, can we, you know, really achieve our dreams, our goals, the way we once did?

You know, I think some people are even questioning, is it worth going to college? If I'm going to run up 60,000, 70,000 to $80,000 in debt, is that really worth it? Others are saying, you're crazy not to go to college. That's certainly the best way to secure your future economic advancement in this increasingly complicated, technological, globalized world. So things are getting better, but as, you know, Ben Bernanke said today, they're still not where many of us would like them to be.

CONAN: Steven Greenhouse, as always, thank you so much for your time and for a glimpse of your next piece.

GREENHOUSE: Thanks, Neal, and great show as always and always an honor to be here. Thanks.

CONAN: Steven Greenhouse of The New York Times. You're listening to TALK OF THE NATION from NPR News. Transcript provided by NPR, Copyright NPR.